For a new online retailer just learning how to navigate the order fulfillment ecosystem, Amazon’s Fulfilled by Amazon (FBA) service comes as a blessing. For one, you only need to worry about procurement, while Amazon does the fulfillment for you. Also, FBA allows you to sell with zero direct warehouse costs.
However, as you scale, FBA can become an expensive retail channel for serious sellers looking to build a brand.
The commissions just add up and you pay out more than you need to in order to make a sale. Also, since you’re already managing inventory on other channels (offline or online), it is ideal that you do the same with Amazon and treat it as just another channel. The Merchant Fulfilled Network (MFN) – also known as Fulfillment by Merchant (FBM) is the way to do just that.
Here’s our take on FBA vs MFN to help you make the right choice for your business.
As a retailer, it is imperative that you weigh the pros and cons of each and choose the one that is just right for you. Let’s look at FBA first.
Advantages of FBA
1. FBA is great for newbies
Choosing FBA as your order fulfillment route means sending your products to Amazon – which will store them in its fulfillment centers – and allowing it to take care of everything else from there.
2. Warehousing facilities and costs are built into the service
If you have a big inventory and nowhere to store it, this may come as a huge relief.
3. Amazon may offer customers perks
FBA products are eligible for unlimited free one-day and two-day delivery options with Amazon Prime, which promotes customer delight.
4. FBA is great for wholesalers
FBA is ideal for products being sold in high volume with relatively higher margins. If you are a wholesaler with a potential for a much wider audience by listing your goods on Amazon, you may find this option useful.
5. FBA has a flexible rate structure
FBA’s flexible rate structure means you only pay for the services you use – no additional subscription fees, no minimum units, and no start-up fees.
Thus, with Amazon to fulfill all your shipping and delivery needs, you can focus more on putting your business out there.
Why FBA Isn’t Always Ideal
However, there are a few downsides to FBA.
The #1 downside is that as your brand grows, FBA ends up becoming quite expensive and cutting into your capital and profits a great deal. Fulfillment or shipping fees, picking and packing charges, return fees, storage fees all cut into your margin. Depending on where you have to ship, how often, and how much, this can get expensive real fast. Your inventory is less visible as it is distributed over various fulfillment centers. Plus, FBA lowers brand recall, as everything from shipping to delivery to returns and replacements happens under Amazon’s name. Your products will end up being perceived as being sold by Amazon instead of you.
Advantages of Merchant Fulfilled Network (MFN)
MFN works out quite well if your business is growing. You have the liberty to pack and ship your products your own way and get a say in the way your brand grows. It’s also a better option if you sell low volume, lower profit margin products. Choosing MFN to fulfill your orders on Amazon leaves the reins of order fulfillment operations entirely to you. Once you set up an Amazon seller account, you do everything from listing your products to storing, packing, and shipping them when you receive orders. This also means that you are liable for any delays, missing products, or damaged goods reaching your buyers.
1. Better inventory visibility
Fulfilling product orders by yourself gives you more control over every stage of your business. This includes increased visibility of your inventory, which makes it easier for you to reorder when stocks dip and ensure timely deliveries. Also, when you’re selling across many channels, it is always wiser to control all of the inventory yourself using a single system like Primaseller.
2. Higher availability of working capital and profits
Saving on the fulfillment fees and storage fees you may have to pay out with FBA is a plus. You can direct the surplus available capital toward other crucial day-to-day functions and increase your profits per product.
In addition, you could also find a cheaper warehouse or one in close proximity to store your products, thus reducing your shipment charges. This is especially useful for managing products that have lesser profit margins.
3. Great for building your Brand
MFN is the ideal choice if you are looking to establish a relatively new brand. Because you handle every step of the order fulfillment process, buyers will get a chance to know your brand and vice versa. And naturally, if your service is good, they will come back to you and could even become loyal customers. Even while you sell on Amazon, MFN gives you better control over your product’s packaging, so you can make an impression with each sale.
Moreover, you also get access to your buyers’ database so you can send out customized emails, and even direct people to a more viable sales channel such as your web store. More intrinsic to your business is the fact that you interact directly with your customers. Therefore, you have a better perspective on their opinions and feedback.
4. A wider choice of shipping partners
You can choose which shipping partner to use for which shipment based on the relative urgency of the shipment vs. the cost factor. Moreover, you can track the shipment every step of the way until it reaches the end customer.
Returns and replacements are also far more hassle-free when you have the choice of shipping through whichever partner you like. The same partner can help pick up returns and deliver replacements back to the customer at a nominal cost agreed between just the two of you.
Downsides of MFN
- Inventory management and a lot of DIY
- Customer reach can be limited
From having to set up your own storage sites, to find the right partners, to having to handle customers, MFN entails a lot of work. You may be stretched at times. Plus, When you choose MFN, you have to put in a lot of effort to win loyal customers. Your market research and marketing strategies should be top-notch to achieve the reach you want.
No matter which option you choose, Primaseller’s inventory management software makes your way smoother. With a choice of over fourteen shipping partners across the world, MFN becomes a breeze. The option of setting up order management for Amazon as one of your sales channels helps ease the process.
If you choose FBA, the efficient inventory management system helps you track all shipments, sales, exchanges, and returns in real-time, even after they have been sent out to Amazon or any other sales channel. You can auto-generate POs for your best moving products and maintain the supply channel.
Every time you receive an order from an online channel or your retail store, Primaseller’s inventory management software not only fetches that order but it also automatically updates inventory information to all online channels where the product is listed.
You can also print barcodes for products you receive and stock.
This leads to effective and smooth operations during POS billing, inventory increments, and many other features in Primaseller that offer a barcode scan.
Primaseller also makes it easy to create and store your digital catalog or fetch it from any online channel that you are integrated with. Our ‘Catalog Sync’ helps you get started with Primaseller instantly. Your team can update a catalog and add new products to all or selected channels to get inventory and price synchronized.
Whether you decide to opt for FBA or MFN, we’ve got you covered!